Construction Law 2023

Last Updated June 08, 2023

Colombia

Law and Practice

Authors



Pinilla, González & Prieto values gathering knowledge in teams to build comprehensive solutions. The firm generates results supported by a complete understanding, from different perspectives, of the challenges that clients face, and this is reflected in its portfolio of services. Since the mid-1980s, the firm has worked with thousands of individuals and companies (Colombian and international) in different areas of law. That experience and the firm’s lawyers are the base of knowledge that allows it to generate results. To guarantee the comprehensiveness of its services, a team of professionals in architecture, design, and urban planning works hand in hand with Pinilla, González & Prieto’s lawyers. In addition, this team supports or co-ordinates the technical and financial aspects required by the different areas of the firm. The firm’s real estate practice has been ranked in Chambers Latin America for over a decade.

The laws governing the construction market in Colombia depend on the type of construction that will be developed and the parties involved. Therefore, there are at least three principal groups of laws that apply, the last one applying to all construction practices:

The provisions listed above contain the main regulations for construction in Colombia, but it may be important to review each of the laws that modify the regime, even if the changes are already included in the most recent versions of the aforementioned provisions. Also, there are some other laws regulating more specific and technical matters in construction.

While the use of standard contracts is not mandatory within Colombia, two of the most frequent employers in construction in Colombia, at least in terms of infrastructure, are public entities: the National Roads Institute (INVÍAS) and the National Infrastructure Agency (ANI), which have incorporated standard contracts within their practice. In addition, although not mandatory, these standard contracts have been used by other actors in the market to fill in for issues not foreseen in their private contracts.

These standard contracts, when used, cover the employer-contractor relationship and contractor-designer relationship. They deal less with the contractor-subcontractor relationship, as this usually encompasses case-specific agreements and contractual regulations applicable only on a case-by-case basis.

The entities within Colombia that typically act as employers are, from a public perspective, INVÍAS, ANI and some government ministries such as the Housing Ministry. There are also other entities in the public sphere, such as the Institute of Urban Development (IDU), utility companies, and local authorities such as public works departments in cities.

On the other hand, from a private perspective, infrastructure and real estate companies are the leading employers in construction projects.

Both infrastructure and real estate companies act as contractors in this jurisdiction. Regarding any relationship, from a labour perspective, there is independence between the employer, the contractor and the subcontractor. That is to say, there is no subordination or a labour relationship between them and each company will execute the contract with their own resources. Nevertheless, joint and several liability may arise when there is a breach of the provisions regarding illegal outsourcing. Regarding the financier, there is no risk because provisions regarding outsourcing only apply when the activities developed by the contractor or subcontractor could be seen as part of the object of the financier.

Both infrastructure and real estate companies can act as subcontractors in this jurisdiction.

Financiers of construction projects are typically: the State, through the entities intended to commission construction projects, private companies, or institutional investors such as pension funds. Usually, the obligations of the financiers are related to the following:

  • the control of the execution of the project;
  • the possibility of stopping or dividing payments in case of non-compliance;
  • in the case of non-compliance by the contractor, the possibility of taking responsibility for the project and executing it itself or assigning it to a third party;
  • finally, and principally, providing the necessary resources for the project according to the contract.

Typically, there is a relationship between the financier and the contractor but none with the subcontractor. In any case, the relationship between the financier and the contractor relies upon the contract or agreements for the financier to provide the resources for the project.

For construction contracts between private parties, the purpose and scope of the works are determined depending on the conditions of the specific project. Therefore, the parties will define methods, technical requirements, work specifications, and budget, amongst other relevant aspects.

For construction projects involving government entities, the purpose and scope of the contract will be defined by the contracting entity before the opening of the selection process. Colombian law has diverse mechanisms for construction contracts involving government entities, such as those referred to in public procurement laws or those contemplated in regulations for public-private partnerships.

In Colombia, the scope and price for variations in construction contracts are typically determined and limited through private contractual agreements between the employer and the contractor. The specific terms and conditions regarding variations are usually outlined in the contract. Three types of contract are prevalent in Colombia:

  • fixed lump sum contracts;
  • unit price contracts; and
  • hybrid contracts.

The variations are dealt with as follows:

  • If the employer requests a variation, the scope and price are generally negotiated between the parties; the contractor may submit a variation proposal, including the anticipated changes in scope and associated costs.
  • Similarly, if the contractor requests a variation, they typically submit a variation proposal to the employer, outlining the proposed changes in scope and associated costs; the employer reviews the proposal and has the right to accept, negotiate, or reject the variation (for instance, an annexe is usually attached to the contract through which a supply is established in contractual relationships).
  • It is important to note that specific legal and contractual provisions may differ, and it is advisable to review the meaning under the law for the particular contract terms to fully understand the scope and price determination processes for variations in each construction project in Colombia.

The responsibilities regarding the design process in construction projects can be divided among multiple parties, including the employer, the designer, the contractor, and other stakeholders.

The specific division of work can vary depending on the contractual arrangements and project specifics. However, the typical division of responsibilities is set out below:

The employer:

  • defines project objectives and requirements;
  • provides project briefs, including functional and technical requirements;
  • engages and appoints the designer(s) and other consultants;
  • approves and gives necessary information as part of the design process;
  • reviews and approves the final design documents; and
  • ensures compliance with applicable regulations and permits.

The designer:

  • develops the design concept and prepares design proposals;
  • prepares detailed design drawings, specifications, and calculations (which the competent planning authority must approve);
  • co-ordinates with other consultants, such as structural engineers and MEP (mechanical, electrical, plumbing) engineers, among others;
  • ensures compliance with building codes, regulations, and industry standards (Urban Planning, Decree 1077/2015, and NSR10 codes);
  • incorporates the employer’s feedback and obtains necessary approvals; and
  • provides support during the construction phase, responding to design-related queries and providing clarifications.

The contractor:

  • implements the design by executing construction activities;
  • reviews the design documents for constructability and feasibility;
  • may propose alternative design solutions or value engineering options; 
  • procures materials, equipment, and labour required for construction; 
  • manages subcontractors and oversees the construction process;
  • collaborates with the designer to resolve design-related issues during construction; and
  • ensures compliance with quality, safety, and environmental requirements.

Notwithstanding the above, the widespread market practice in Colombia is for the employer to first issue the designs, which must then be revised and modified by the contractor to ensure the viability and correct execution of the project and no further delays due to errors or problems with the designs.

Following the provisions of the urban planning regulations, the project developer has the responsibility and obligation to execute residential public service infrastructure that allows the land’s adaptation, endowment, and subdivision; that is, it must execute the local or secondary network. Likewise, the builder of the building must advance the construction of the internal or intra-domiciliary network of housing units, which is necessary for the effective connection and provision of public services to each housing unit.

The responsible developer oversees execution of the urban planning works, delivery, and endowment of assignment areas contained in an urban development licence.

The responsible constructor (builder) is the ideal professional for load-bearing construction works, allowing human habitability under the terms of Colombian law. In this sense, the builder is the professional civil engineer or architect with responsibility for the construction of a building.

Pollution

The responsibility for preventing and mitigating pollution at the construction site is primarily governed by environmental regulations and laws established by the Colombian government, such as the Environmental Licensing Law (Law 99 of 1993) and its subsequent regulations. Therefore, the contractor is generally responsible for implementing measures to prevent pollution and comply with environmental regulations. This includes managing construction waste, implementing proper disposal procedures, controlling emissions, and minimising environmental impact.

Underground Obstacles

How the presence of underground obstacles, such as utilities or archaeological sites, should be dealt with is regulated by various laws and regulations. For example, the Underground Utilities Protection Law (Law 232 of 1995) protects utility infrastructure during construction activities.

The contractor is typically responsible for identifying and managing underground obstacles during construction. In addition, they are expected to conduct surveys and take necessary precautions to avoid damaging utilities or other underground infrastructure.

Geotechnical Conditions

The responsibility for assessing and dealing with geotechnical conditions is commonly addressed through contractual agreements. The employer and the contractor negotiate and define the scope of geotechnical investigations, testing, and any necessary mitigation measures in the contract documents. In addition, the employer often engages a geotechnical consultant to conduct studies and provide recommendations. The contractor relies on this information to plan and execute the construction work under the specified geotechnical requirements approved by Urban Planning Authority.

Archaeological Finds

Finally, in Colombia, archaeological finds are protected by the Cultural Heritage Protection Law and its regulations. These laws require the reporting and preservation of archaeological discoveries. Therefore, if archaeological finds are encountered during construction, the contractor is legally obligated to halt work, report the findings to the relevant authorities, and co-operate in preserving the archaeological site as per the regulations. The responsibility for any associated costs or delays is typically negotiated and defined in the contract.

In Colombia, the permits required for a construction process can vary depending on the specific project, location, and nature of the construction. However, some common permits typically required include the following:

  • A construction licence – this permit grants authorisation to carry out the construction project and is usually obtained from the municipal or local authorities where the construction will take place.
  • An environmental licence – projects with potential environmental impacts may require an environmental licence or environmental management plan; this permit ensures compliance with environmental regulations and mitigation measures.
  • Urban planning and zoning permits – these permits verify that the construction project aligns with the local urban planning regulations, zoning ordinances, and land-use requirements.
  • Road occupancy permits – if the construction project involves any road or public space occupation, a road occupancy permit may be required to ensure public safety and minimise disruptions.

The responsibility for obtaining the necessary permits in Colombia is typically shared among multiple parties:

  • The employer/project owner is often responsible for initiating the permit application process; they provide project information, engage consultants, and co-ordinate with the relevant authorities.
  • The designers and consultants (eg, architects, engineers, and other design professionals) play a role in preparing the necessary documentation and technical reports required for permit applications.
  • The contractors collaborate with the employer and designers to provide project-specific information, technical details, and construction plans required for permit applications.

Maintenance of the works during construction is usually the contractor’s responsibility. Once the construction is concluded, and depending on the schemes under which the employer hired the contractor, the parties may agree that the maintenance of the works falls within the scope of activities to be carried out by the contractor under a different and specific contract.

Additionally, construction permits issued in favour of contractors provide specific obligations regarding the maintenance of the works during the construction process, in which case the permit holder would be the responsible party before the corresponding authorities.

It is common for the employer to instruct the contractor or third parties regarding other functions in the construction process beyond the scope of the physical construction work. The employer defines the requirements and expectations for these functions, and the contractor or third parties are responsible for executing them according to the given instructions.

It is worth noting that the specific instructions and requirements for operations, finance, and transfer can vary depending on the project and the negotiated terms between the parties. However, the contractual agreements between the employer and contractor usually outline the responsibilities and obligations of these functions, ensuring clarity and accountability throughout the construction process and beyond.

The contractor usually carries out tests for completion based on a mutual agreement with the employer or the government entity commissioning for the project. For these purposes, the contractor will generally submit a testing execution schedule defining the items to be tested.

If, because of a test, any facilities, materials, or execution are deemed defective or in contravention of the contract and its appendices, the employer may reject the completion by written notice to the contractor, which will either conduct the test again or take any necessary action to fix the defects.

Completion refers to the stage when the construction works have been finished following the agreed-upon contract documents and specifications. It signifies that the physical construction is deemed to be complete and the contractor has fulfilled its obligations.

Takeover, or handover, is the process by which the completed works are formally transferred from the contractor to the employer. It involves the employer assuming control and responsibility for the works, typically through a written agreement or a formal acceptance procedure.

Delivery refers to the act of physically delivering possession and control of the completed works from the contractor to the employer. It may involve handing over keys, access cards, documentation, and other relevant items necessary for the employer to assume control and operate the facility.

These processes are interconnected in the following ways:

  • Completion and takeover – completing the construction works is a prerequisite for the takeover process. Once the works are complete, the contractor notifies the employer of the readiness for takeover. The employer, often in collaboration with the designer, inspects the works, verifies their compliance with the contract documents, and determines if they meet the acceptance criteria. If the works are satisfactory, the employer formally takes over the completed works.
  • Takeover and delivery – takeover and delivery are closely linked. Once the works have been taken over, the contractor delivers possession and control of the completed works to the employer. This involves the physical handover of keys, documentation, and other items necessary for the employer to assume control and commence operations or use the facility.

The contractor can be held liable over at least two different periods:

  • The period of ten years of ordinary prescription foreseen in the Colombian Civil Code (Law 84 of 1873) for lawsuits against defects in construction, materials, or designs; however, for vertical construction, there is also special protection under the Consumer Statute (Law 1480 of 2011) and the Safe Housing Law (Law 1796 of 2016).
  • With regard to construction finishes, according to the Consumer Statute, for at least a year or the more extended period defined in the delivery manual of the relevant project.

The method used to establish a contract price in Colombia is subject to the free will of the parties to that contract. However, three ways are the most common regarding this determination:

  • fixed lump sum contracts;
  • unit price contracts; and
  • hybrid contracts.

The first transfers the risks of the execution of the contract to the contractor because the employer pays a total amount, not subject to change, for the whole construction process, having the contractor deal with any cost overruns and provide for all the materials, equipment, labour, supervision and any other expense required for the construction.

The second transfers the risk from the contractor to the employer, as the contract’s total price is divided into unit prices which may eventually suffer readjustments and affect the final cost of the contract.

Finally, the third combines the first two types, having part of the contract as a fixed lump sum contract but keeping certain elements that are known to be more volatile (eg, those tied to oil prices) under the form of a unit price contract, therefore sharing the risk of the contract between employer and contractor.

Any of these methods can include milestone payments upon completing certain activities or works determined in the contract once certified by the contractor to the employer.

The measures used in construction contracts to manage late or non-payment have changed over time. While early models often featured advanced payments, more current regulations have limited the use of this device because of the poor management of that money. Instead, these contemporary regulations prefer interim and milestone payments, in which the construction works are divided into functional units so that the employer pays the contractor once an available unit is finished.

To deal with non-payment or late payment from the employer, contractors usually file lawsuits in the jurisdiction of the contract to achieve recognition of pending interest and/or pending charges. The courts or arbitration panels with jurisdiction depend on the will of the parties and the clauses in the contract. The latter is particularly important because they can include dispute resolution agreements to exhaust negotiation processes before resorting to legal channels.

In Colombia, there is only one means of invoicing, which is regulated by the country’s tax authority: the National Tax and Customs Directorate (DIAN). Also, in Colombia, the accepted invoicing methodology is electronic invoicing to foster both greater agility in the commercial operations carried out in the country and the cross-checking of information carried out by DIAN.

Usually, the employer designs or independently hires someone to design the construction. Then, according to the design, a budget and a schedule are issued. Once the contracting process begins and the employer hires a contractor, these designs are given to the contractor, who has the obligation and exclusive responsibility to identify the adjustments, modifications and/or corrections it deems pertinent and necessary to the studies and detailed designs delivered to it, so that they incorporate those elements that will allow the total and satisfactory execution of the works under the technical specifications governing the contract.

Therefore, the planning is safeguarded by a two-way review of the designs by the parties who have the greatest interest in there being no cost overruns. The contractor, in particular, would be responsible for these if it did not review the contract with sufficient scrutiny. Milestone payments may be used, but that depends on the structure of the contract and the payment mode agreed upon.

In case of delays, the contractor must often make a contingency plan to remedy such delays. Similarly, any negligent execution of the contract by the contractor, which delays the construction and/or makes the construction more expensive, is contractually assumed by the contractor.

Regarding concurrent delays, Colombian jurisprudence has asserted that the unfulfilled contract exception applies in such cases. This means that if both parties simultaneously delay compliance with their obligations, neither is liable. However, if one of them breaches the contract or delays first, the other party is not obliged to fulfil its obligations while being able to enforce compliance from the other party.

In case of delays, the most common remedies available to the employer are:

  • injunctions;
  • notices to correct;
  • imposition of fines;
  • application of the penalty clause; and
  • the possibility of the employer to reassume control of the construction and open bidding for a new contractor.

However, this order is generally progressive because the employer can apply more than one of the above. For example, remedial periods must usually be opened first to use the penalty clause.

As the contracts and designs usually include a two-way review and the possibility for the contractor to change those initially made by the employer, there is little possibility for the contractor to request an extension on time without patrimony and liability consequences. Indeed, the contractor, according to its revised designs, issues an operational plan with the time extension of each activity and that of the construction as a whole.

However, the contractor might change the working plan, but only for specific activities, without affecting the deadline of the construction as a whole. Therefore, unless otherwise provided in the contract, only under circumstances of force majeure and unforeseeable circumstances can the contractor request an extension of time without damages. In any other event, the contractor will assume any costs and expenses caused by a delay.

As defined by the Colombian Supreme Court and Colombian statutes, events of force majeure constitute unforeseen events that cannot be resisted, usually coming from irresistible natural events such as earthquakes, tsunamis, shipwrecks or the action of a third party. The key element of such events is that they combine unpredictability with irresistibility by any human means, being external to the party affected. However, it is sometimes possible to exclude events ordinarily considered force majeure from their legal effects, given the specific nature of construction activities. It is also possible to contractually nuance the effects of force majeure. Nevertheless, as the law gives this definition and prevails against contractual clauses, it is impossible to complexly exclude or limit events that can constitute force majeure.

In addition, Colombian law foresees what are commonly known as fortuitous events, whose only difference from force majeure is that the unforeseeable events considered in the latter come as external to the business ordinarily carried out by the affected party, while the events considered in the former are within the activities ordinarily carried out by the affected party. In any case, both force majeure and fortuitous events are regulated in Colombian law and the typical consequences for these events imply an obligation for the contractor to mitigate the effects of the damage to the construction project and to continue to execute those contractual activities not affected by the event. Contractually, the parties can agree on an additional obligation for the contractor to notify the event considered to be force majeure. Eventually, this type of event might entail the suspension of the contract as a whole or of the contractual activities it affects until the force majeure is overcome. Exceptionally, however, the contract can be terminated if the obligations of any party become legally impossible. Finally, the delays for force majeure events excludes liability for the non-compliance of the part affected.

Similarly to force majeure events, those involving unforeseeable circumstances have effects on the execution of the contract. Some of them, such as regulatory changes (in obtaining authorisations, environmental licences, or prior consultation), have the virtue of changing the schedule of the activities and, eventually, an adjustment in the price of the contract. However, others can be contractually dealt with by assigning the risks of such events.

Disruption is a legal ground for the extension of time or adjustment in the consideration on a contract only if a third party causes it and has the potential to delay the execution of the project and affect the prices in the contract; in this case it is not possible to apply the breach of contract provisions. If the disruption is attributed to any party, breach of contract provisions will apply.

Although the possibility of limiting or excluding certain liabilities in the contract is the rule and not the exception under Colombian Law, therefore admitting the modification of liabilities according to the will of the parties, there is a specific liability that cannot be excluded. This liability is future “wilful misconduct” (the Colombian equivalent of gross negligence), which according to Article 1522 of the Colombian Civil Code, cannot be excluded by an agreement between the parties or a contractual clause. In addition, another vaguer exception limits the possibility of agreeing to clauses that exclude liability but are contrary to good faith, public order, or morals.

Wilful misconduct and gross negligence concepts exist under Colombian law and are defined in Article 63 of the Colombian Civil Code. Colombian legal doctrine and jurisprudence regard these concepts as essentially the same and prohibit any agreement or pact between the parties with the effect of excluding or limiting future wilful misconduct and gross negligence that might result in liability for the parties.

The Colombian Civil Code authorises the parties to modify the criteria to impose liability according to their will and convenience. Therefore, the principle of total or integral compensation becomes nuanced. Although Article 1616 of the Colombian Civil Code establishes general rules for the liability of a contracting party that has caused damages to the other, it also states that those rules can be modified through contractual provisions.

The liabilities are usually limited contractually, to the degree and in the cases agreed upon by the contracting parties. However, usually, to guarantee the quality of the construction, the liability of the contractor is rarely limited.

Indemnities depend on the type of contract agreed between the parties. Traditionally, however, the designer is not responsible for the execution of the project, or indemnities are generated concerning the information given for the fulfilment of a given task (for example, design or construction). Moreover, some indemnities can emerge depending on the risks contractually taken by one party or the other, such as those regarding real estate management, social management, or environmental issues. These risks are most evident in infrastructure projects, with environmental issues also crucial in real estate construction because of the land where the project is developed.

Guarantees vary from public to private works. From a public perspective, there is a crucial one called the Garantía Única de Cumplimiento, or single performance guarantee, which entails a guarantee for the correct management of advanced payments, compliance with the contract in the strictest sense, stability in the works, and quality in the designs. There are also relevant guarantees regarding the labour obligations of the contractor and non-contractual civil liabilities, which are usually dealt with through insurance and apply to private and public works.

The following are the forms of insurance typically taken out in construction contracts in Colombia:

  • insurance for compliance with the contract, for the time of execution of the contract, and guaranteeing all of the damages caused by the partial or total non-compliance of the contractor;
  • insurance of good management of advanced payments, for at least the time of execution of the contract, guaranteeing the correct investment of the total value of the advanced payment;
  • insurance for wages, social benefits, and labour indemnities to ensure the labour obligations of the contractor;
  • insurance for the stability and quality of the construction, guaranteeing any defect or damage within the work;
  • insurance against all-risk, insuring any damage in the constructions and machinery; and
  • insurance for non-contractual civil liability, guaranteeing the damages that can occur affecting third parties.

If the contractor becomes insolvent, the employer usually keeps the possibility of reassuming the contract to give it to a solvent third party to continue its execution. Contractual provisions regarding the employer’s insolvency are not usually foreseen and are rare in practice.

Typically, risks are undertaken individually and independently in the contract arrangement. However, one widespread practice within the Colombian market is to prepare a matrix of risk in advance to the contracting process. This matrix analyses the risks and states the party that will eventually take each one. It is also crucial because the risks assigned to the parties may determine or affect the contract’s price. Therefore, no general provision establishes the risks to be taken by one party or the other. Still, the possibility of assigning the risks as independent or shared between the parties depends on the analysis made in the contracting process. Therefore, which risks are eventually shared depends on the contracting parties will.

The employer has a contractual relationship with the contractor governed by civil and commercial law, not labour law. The agreement is therefore not a labour one. In turn, for the performance of the contract, it is usually stipulated that the contractor shall have adequate, suitable, and sufficient personnel for the execution of the contract. The personnel have no relationship with the employer, only the contractor.

Construction contracts include the possibility of subcontracting in the contract’s performance to fulfil the obligations derived from the agreement. Usually, this possibility is limited in certain aspects, such as requiring previous approval from the employer or being subject to a percentage of the total value of the construction.

Construction contracts can include clauses related to intellectual property that emerges from the performance of the contract. For example, parties can decide who is entitled to ownership and exploitation rights or royalties. Generally, it is agreed that the employer will own those rights, notwithstanding the author’s moral rights, which shall remain vested in the creator of the work.

In the event of a breach of the construction contract, the following remedies can be applied:

  • fines or penalties that the contractor must pay; and
  • contingency plans which detail the steps to rectify arrears in the performance of the contract.

The ability to contractually limit the remedies available for the contracting parties is vast due to the possibility foreseen in Article 1604 of the Colombian Civil Code to exclude or reduce the exposure to liability of any of both parties, except for the cases in which the parties wrongfully agree to condone future wilful misconduct or gross negligence.

Sole remedy clauses for the complete scope of disputes that may arise from the execution of the contract are rare. However, arrangements may contain clauses obliging the party to resort to a specific remedy if a dispute arises.

Colombian law categorises damages as (i) property damages and (ii) non-pecuniary damages. The former include consequential damage and loss of profit, which must be specific and quantifiable.

Construction contracts do not include non-pecuniary damages, a concept that refers to the injury suffered by a person regarding their feelings, emotions, honour, reputation, or physical or mental health, which the judge quantifies to compensate for the damage experienced by that person.

Retention clauses are not excluded in this jurisdiction.

Construction contracts can include suspension clauses that restrict the occurrence of certain events, such as:

  • force majeure;
  • mutual agreement between the parties; and
  • other causes established by law.

Nevertheless, other clauses can be included depending on the nature of the parts involved, such as unilateral termination.

The legal and contractual possibilities for termination of a construction contract can include:

  • the expiration of the term foreseen for the execution of its object;
  • the fulfilment of the contractual object;
  • the absolute impossibility to comply with the contractual object;
  • mutual agreement between the parties;
  • a legal and/or judicial order of the last instance against which no appeal is allowed; and
  • other causes established by law.

Construction contracts may also include clauses of anticipated and unilateral termination, where the parties determine, case by case, the specific reasons that make these terms applicable.

The consequences of such termination are that:

  • economic recognition is limited to the amount owed to the contractor for the works constructed until the contract’s termination date; and
  • a penalty clause in favour of the employer, paid by the contractor for the anticipated termination of the contract due to causes attributable to the contractor.

Colombian procedural law establishes criteria to determine jurisdiction, depending on certain aspects such as the place of execution of the contract or the parties involved.

Civil jurisdiction is competent to adjudicate disputes between private parties in disputes governed by civil and commercial law.

Otherwise, when disputes arise out of contracts executed with government entities under Colombian law, they will be brought before the administrative jurisdiction.

Within these jurisdictions, other factors can affect each court’s competence, known as objective, subjective, territorial, functional, and connectivity factors.

  • Objective: related to the object of the dispute, either in terms of its nature (ratione materiae) or its amount (value of the claim).
  • Subjective: generated by the characteristics of the persons involved in the litigation (ratione personae).
  • Functional: derives from the tasks or functions the judge performs; it refers to the different instances, such as the judge that decides an appeal.
  • Territorial: defined as the result of the country’s division by law into judicial districts so that within the limits of its territorial boundary, an organ may exercise jurisdiction over a specific matter.
  • Connectivity: related to the circumstance that a judge, notwithstanding not being competent to handle a case or some of the claims formulated in the lawsuit, may hear them by their accumulation with others where they are competent.

Colombian law has recognised diverse mechanisms for alternative dispute resolution (ADR), such as arbitration, conciliation, and amicable settlement. These mechanisms can be included in construction contracts, executed between private parties or with government entities, taking into account certain restrictions that apply to the latter. However, in practice, contracting parties usually determine one or more particular types of ADR depending on the specifics of each case due to the differences between each mechanism that can be more suitable or convenient for resolving the dispute.

Pinilla, González & Prieto

Avenida Calle 72 # 6-30 Pisos 9 y 14.
Bogotá
Colombia

+57 (601) 2101000

+57 (601) 2101000

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Authors



Pinilla, González & Prieto values gathering knowledge in teams to build comprehensive solutions. The firm generates results supported by a complete understanding, from different perspectives, of the challenges that clients face, and this is reflected in its portfolio of services. Since the mid-1980s, the firm has worked with thousands of individuals and companies (Colombian and international) in different areas of law. That experience and the firm’s lawyers are the base of knowledge that allows it to generate results. To guarantee the comprehensiveness of its services, a team of professionals in architecture, design, and urban planning works hand in hand with Pinilla, González & Prieto’s lawyers. In addition, this team supports or co-ordinates the technical and financial aspects required by the different areas of the firm. The firm’s real estate practice has been ranked in Chambers Latin America for over a decade.

Colombia’s National Development Plan

On 5 May 2023, a bill for the Colombian National Development Plan 2022–2026, known as “Colombia: World Power of Life” was approved by the Colombian Congress. It was signed into law by President Gustavo Petro under the number 2294 on 19 May 2023.

In this regard, it is essential to remember that the National Development Plan (NDP) is an instrument that defines the objectives, goals, strategies, and national and sectorial policies in the long, medium, and short term that will be the object of state action, identifying the mechanisms and procedures for their achievement, as well as forecasting the financial resources available for their execution based on an investment plan covering the next four years.

Initially, it should be noted that the NDP establishes five “transformation pillars” through which the forecasts are structured in terms of policies, goals, and objectives. The pillars are (i) land management around water; (ii) human security and social justice; (iii) the human right to food; (iv) productive transformation, internationalisation and climate action; and (v) regional convergence.

This article will address the most relevant aspects that influence the framework of territorial planning and development adopted by the NDP, as described below.

The Territorial Administration System

The Territorial Administration System (TAS) created by the NDP is understood as the set of procedures, inter-institutional agreements, legal frameworks, standards, and technologies required to enable harmonious collaboration between the different levels of the government and civic participation, allowing the use of territorial information in making comprehensive and co-ordinated decisions and the adequate provision of services to citizens concerning the rights, restrictions, and responsibilities regarding the use, value, and development of land.

The prevalence of environmental elements of special protection

In response to the transformation pillars mentioned above, mainly those seeking to protect water cycles and food security, the NDP modifies Article 10 of Law 388 of 1997 (Colombia’s legal framework for territorial planning).

The change, which identifies the regulations that constitute superior hierarchy determinants for the zoning plan (ZP), consists in (i) reinforcing the prevalence of the environmental elements and (ii) adding as determinants the areas of particular interest to protect the human right to food and the special tourist projects and associated infrastructure, defined by the Ministry of Commerce, Industry and Tourism.

Likewise, the NDP creates Territorial Water Councils, which will be regulated by the Ministry of Environment and Sustainable Development, and whose purpose will be to strengthen multilevel, differential, inclusive, and fair water governance and territorial management around water, seeking the consolidation of functional territories with a focus on adaptability to climate change and risk management, and which may also participate in the territorial planning instruments.

Cadastral management and appraisal updating

The NDP establishes the Agustín Codazzi Geographic Institute (ACGI) as the authority responsible for cadastral management and the corresponding cadastral operators, which involves a set of technical and administrative operations aimed at the adequate formation, updating, conservation and diffusion of cadastral information. This is intended to contribute to the efficient provision of services and procedures to the citizens and the administration of the territory, supporting the legal security of property rights, the strengthening of local tax authorities and support for planning and territorial management processes, with an intercultural perspective.

Equally, the NDP establishes the obligation of the ACGI to adjust cadastral appraisals based on adopting methodologies and models for a massive update of lagged cadastral values, which allows an automatic adjustment of the cadastral appraisals of all the properties in the country. However, properties that have been subject to cadastral updating during the five years before the adoption of the NDP or that are being updated during its adoption, are exempted from such adjustment.

Considering that the updating of cadastral appraisals will generate an increase in the value of the Unified Property Tax, the Ministry of Finance and Public Credit and the National Planning Department are empowered to co-ordinate the preparation of a bill that allows setting limits to such growth under the principles of progressiveness and strengthening of territorial public finances.

Surface rights of properties owed by public entities for transport infrastructure

The surface right (SR) is conceived as a contractual, alienable, and onerous right over public property intended to be used for transportation infrastructure owned by public entities in favour of private parties, which authorises the construction of buildings in the free areas of such property, according to the territorial management regulations of the place where the property is located and the zoning plan.

For this purpose, it is necessary to obtain the corresponding construction licence and to sign the contract, which will be notarised and registered in the respective certificate that identifies the property before the Public Instruments Registry Office.

The contracts that give rise to the SR may have a maximum term of 80 years, including extensions, and will lead to the assignment of independent property titles to the buildings constructed in the remaining areas of the public property. The effects will finish with the expiration of the term of the SR.

Regarding social housing and its regulation

Regarding social housing (SH), the value limits on the maximum sale price of a house provided in the previous NDP (Law 1955 of 2019) are maintained, which are 135 Legal Basic Wages (LBW) for SH and 90 LBW for Social Housing of Priority Interest (SHPI), but identifying exceptional cases in which the value could be increased up to 150 LBW, as established by the national government, based on technical studies, such as:

  • when the housing incorporates sustainability criteria in addition to the minimums defined by the national government;
  • when the dwellings, as defined by CONPES 3819 of 2014, as amended, are located in “uninodal” cities whose population exceeds 300,000 inhabitants or in urban agglomerations whose population exceeds 500,000 inhabitants; and
  • when the dwellings are located in territories that have difficult access or respond to specific cultural, geographic, economic, or climatic characteristics under conditions defined by the national government.

Similarly, based on technical studies, it will be possible to define values higher than 135 LBW in some of the most remote departments of the country in order to recognise the costs of construction materials and their transportation as well as labour.

In addition, regulatory faculties are granted to the Ministry of Housing, City and Territory regarding the following aspects:

  • The definition of the socio-economic conditions that households must meet, the mechanisms applicable to be eligible for the housing policy, the minimum habitability characteristics of the housing and its environment, and the active and passive sustainability measures that must be included in social housing.
  • The conditions for developing SH in urban renewal programmes and projects must be between 135 and 175 LBW. As for SHPI, it must be between 90 and 110 LBW.

It should be mentioned that the NDP foresees the progressive closure of the social housing subsidy programme in rural areas.

Formalisation of private property that has been the beneficiary of a family housing subsidy

The NDP empowers the Ministry of Housing, City and Territory to adopt the corresponding regulations regarding the procedure to formalise private property through the granting of legally registered property titles to households that have the status of possessors and have been beneficiaries of any form of family housing subsidy.

For this purpose, it is relevant to consider that the possession must fulfil the legal provisions on the acquisitive prescription of domain, succession, and regularisation as provided in Law 1561 of 201, as amended.

Furthermore, the Ministry is empowered to regulate the adoption of programmes for the formalisation and/or regularisation of the wrongful transfer of ownership tradition and titling of rural property as long as the rural property has been or will be subject to the family housing subsidy.

On the other hand, it should be noted that the Ministry will also regulate the special conditions to authorise the execution of housing improvement interventions, progressive housing, or construction on one’s site, in cases where the family housing subsidy is applied, as well as the terms for verification of compliance with the applicable technical construction standards, without the issuance of the respective construction licence or act of recognition, which must be under the provisions of the corresponding ZP.

Provisions for the articulation of strategic projects that include public transportation systems with zoning plans

The NDP establishes the possibility of reviewing and adjusting the ZPs, following the same procedure for their adoption provided for in Law 388 of 1997, on a one-time basis, of those districts or municipalities in which the execution of strategic projects that include public transportation systems is foreseen and that are co-financed by the national government, with the corresponding technical studies, during the constitutional period between the years 2023 and 2026.

In this case, the following considerations should be taken into account:

  • The guidelines and regulations for urban sustainable transportation-oriented development projects will be established, including the urban planning standards applicable to transportation infrastructure and its areas of influence; the mechanisms for capturing value and land management; mitigation of urban planning impact on mobility, public space, and public services; and the instruments to enable the land required for transportation infrastructure and other associated urban infrastructure.
  • Trust funds can be established regarding financing mechanisms, or financial market instruments may be used to circulate the construction rights.
  • The urban development regulations must define the assignment of the urban renewal or development treatment, the adoption of a use regime, and the mitigation measures for urban development impact, as required.
  • These infrastructures and their influence area may be excluded from the need for a partial plan or any other complementary planning instrument for their habitation and development or may generate a specific planning instrument that regulates the urban development regulation and its management and financing instruments under the provisions of Law 388 of 1997 or the norms that modify, add or substitute it.
  • The influence areas of the transportation corridors that have public passenger transportation system projects co-financed by the nation may be incorporated into the urban renewal treatment by decree to adapt the urban development regulations regarding buildability and uses and establish urban development obligations aimed at financing the construction, operation, and maintenance of the transportation system and generation of public space, as long as there is capacity and disposition for the provision of public utilities for developments to be carried out by partial plan or by urban development licence.

Financing instruments adoption assistance

The NDP’s intention to allow the financing of projects by joining efforts between the national and territorial levels is clearly evidenced by the following provisions:

  • For the financing of public infrastructure projects under the responsibility of the National Infrastructure Agency (NIA) or to obtain the land required for their development, the territorial entities may provide the necessary land or allocate resources through the application of land management and financing instruments in the influence area of the project, such as capital gains for public works or property tax, according to the regulations in force. For this purpose, the projects must be included in the planning instruments of the territorial entity, which in the exercise of its autonomy, may previously agree with NIA on the concurrence of the financing mechanisms.
  • The national government may co-finance the development of studies and designs, as well as the construction of infrastructure associated with strategic projects for urban development contemplated in the different planning instruments, which guarantee the application of standardised criteria in disaster risk management and climate change mitigation following the national co-ordination strategy for adaptation to climate change in human settlements and resettlements.

Other aspects to be mentioned

In general terms, it is relevant to point out the following aspects to be taken into account under the provisions of the NDP:

  • The NDP shows an exceptional approach to protecting indigenous and Afro-descendant communities, intending to promote their active participation in government decisions and guarantee their rights. 
  • Cultural, creative and knowledge territories are created, which are understood as meeting spaces that promote the creation, circulation, and appropriation of cultural, artistic, and knowledge practices, respecting the logic, dynamics, and cultural institutions of each territory, where culture is a fundamental axis for social transformation and the construction of peace in the country, whose regulation will be given by the Ministry of Culture.
  • The NDP provides for the definition, by the Ministry of Housing, City and Territory, of special conditions for the construction of differential housing, including the housing of cultural interest, which allows and encourages the use of alternative materials and systems based on the local, regional, geographic, cultural and historical characteristics of the region or sector of the territory.
  • The NDP empowers the Ministry of Housing, City and Territory to define the conditions to effectively ensure access to water and basic sanitation in those situations where such provision is not possible based on the existing infrastructure and through the application of differential systems, including the possibility of a guarantee through alternative resources that will be subject of regulation.

Based on the above, it is possible to conclude that the NDP includes several relevant provisions regarding territorial planning that will impact future projects in Colombia.

Pinilla, González & Prieto Abogados

Avenida Calle 72 # 6-30 Pisos 9 y 14.
Bogotá
Colombia

+57 (601) 2101000

+57 (601) 2101000

pgp@pgplegal.com www.pgplegal.com
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Pinilla, González & Prieto values gathering knowledge in teams to build comprehensive solutions. The firm generates results supported by a complete understanding, from different perspectives, of the challenges that clients face, and this is reflected in its portfolio of services. Since the mid-1980s, the firm has worked with thousands of individuals and companies (Colombian and international) in different areas of law. That experience and the firm’s lawyers are the base of knowledge that allows it to generate results. To guarantee the comprehensiveness of its services, a team of professionals in architecture, design, and urban planning works hand in hand with Pinilla, González & Prieto’s lawyers. In addition, this team supports or co-ordinates the technical and financial aspects required by the different areas of the firm. The firm’s real estate practice has been ranked in Chambers Latin America for over a decade.

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Pinilla, González & Prieto values gathering knowledge in teams to build comprehensive solutions. The firm generates results supported by a complete understanding, from different perspectives, of the challenges that clients face, and this is reflected in its portfolio of services. Since the mid-1980s, the firm has worked with thousands of individuals and companies (Colombian and international) in different areas of law. That experience and the firm’s lawyers are the base of knowledge that allows it to generate results. To guarantee the comprehensiveness of its services, a team of professionals in architecture, design, and urban planning works hand in hand with Pinilla, González & Prieto’s lawyers. In addition, this team supports or co-ordinates the technical and financial aspects required by the different areas of the firm. The firm’s real estate practice has been ranked in Chambers Latin America for over a decade.

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